Recent Energy Performance Contracting Presentation (10/6/2011)

1. colorado.gov/energy
Financing Energy Efficiency Retrofits with
Performance Contracting
• Presented by: Conor Merrigan, LEED AP BD+C

2. Presentation Overview
• Governor’s Energy Office Overview
• Energy Performance Contracting Introduction
• National and State Perspectives
• How GEO Program Works
• Opportunities and Challenges
• New Markets
• Q&A

3. The Governor’s Energy Office (GEO) Mission
The Governor’s Energy Office promotes sustainable
economic development in Colorado through advancing
the state’s energy markets and industry to create jobs,
increase energy security, lower long term consumer
costs, and protect our environment.

4. Energy Markets Represent a Significant Opportunity for
Colorado
MISSION Tens of thousands of new jobs in the industry across
Jobs
The Governor’s fuel types (emerging & legacy) & supply chain (R&D,
Energy Office promotes sustainable economic
development in manufacturing, O&M)
Colorado through advancing the state’s energy market
and industry to create jobs, increase energy security, lower long term
consumer costs, and protectfuel types & geographic location & reducing
Security Diversifying our environment.
demand through resource efficiency reduces volatility &
increases reliability
Cost Increased efficiency and maturation of renewable
energy and alternative fuels have resulted in new low
cost sources of energy
Environment Fuel consumption represents a major source of
emissions of local pollutants and greenhouse gases

5. Market Opportunities and Barriers in the Colorado Energy
Sector
Est. Colorado Market Opportunities Market
Market Size Barriers
($ MM/yr)
MISSION
The Governor’s nergy Office •promotes(driven byin new
Power Generation
$17,000 sustainable economic infrastructure
Accelerate investment
technologies
• Full accounting of externalities
• Transmission
development in Colorado through advancing the state’s energy markets
(In State) environmental and security • Technology maturity (eg clean coal,
factors) solar)
and industry to create jobs, increase energy security, lower long term
-$1,700 • Displace imports (~10% of • Transmission infrastructure
Power Generation costs, is a net protect our environment.
consumer (CO and consumption • Protectionist policies (CA)
(Export) importer) • Export $1,000s CA, AZ, NV
energy markets)
TBD* • Additional annual economic • Valuation by market makers /
consumer savings TBD FY12* regulators
Consumer Efficiency • Consumer information
• Access to financing
$8,000 • 10% displacement of oil with • Fueling infrastructure
Transportation Fuels alternative fuels will keep • Economies of scale
$8,077 mm / yr in Colorado • Price volatility concerns
• Accounting for externalities
$11,000 • Increased investment potential • Limited market demand and
Natural Gas in CO (amount TBD) export capacity
Production • Public perception driving
regulatory uncertainty

6. GEO Promotes Policies that Support Private Sector Solutions
Profit Societal
Opportunity Interest

7. Why Buildings?
76% of all power plant generated
Buildings Account For Half Of All
electricity is used just to operate
Greenhouse Gas Emissions.
buildings.

8. Energy Performance Contracting
…Process through which energy efficiency
and capital improvements are funded (fully
or partially) by the energy and
maintenance cost savings generated by the
improvements themselves when the cost
savings are financed over a period of time.

9. When to pursue Energy Performance Contracting
Investigating an EPC generally makes sense if:
• Your facilities have an average annual utility spend of over about
$400,000
• Your have a single-owner scenario with a relatively
uncomplicated lease arrangement
• The Owner has an appetite for energy improvements and/or
capital improvements AND
• A willingness to accept a longer term finance period (7-10 years
minimum)

10. Energy Performance Contracting
• A way to upgrade your facilities
without dipping into your
capital budget
• Use future energy and
maintenance savings to pay for
projects

11. Energy Performance Contracting
• Energy Savings Measures funded through guaranteed savings.
• Reallocate money already being spent in utility budget to
purchase efficiency and capital improvements

12. Energy Performance Contracting (Public)
• Financed through lease-purchase agreement
(typical)
• Funds from multiple sources may be combined.
• Guaranteed cost savings pay lease-purchase
• Annual cost savings meet or exceed annual
payments

13. Energy Performance Contracting (Public)
• Up to 25-year term depending on equipment lifetime
• Typical finance term between 12 and 15 years.
• Not impacted by TABOR (annually renewable & subject to
non-appropriations)
• Endorsed (strongly encouraged) by state legislature &
Governor

14. Potential Annual Energy $ Savings
Typical Facility Energy Savings
Opportunity:
15% to 30% (or more)

15. Potential Energy Performance Contract
• Example:
• $500,000 annual utility expense
• 20% annual savings = $100,000
• 10 year tax-exempt lease purchase
• $100,000 X 10 years = $1,000,000
Fund nearly $1M in improvements today and pay it
back over 10 years with funds previously budgeted to
your utility company.

16. Energy Performance Contracting
Relative Activity of Other States
ESCO project investments tend to be concentrated in heavily populated states with supportive
enabling policies; Colorado is a growing market.

17. Energy Performance Contracting
National outlook
17

18. Total Savings from the GEO EPC Program
Total Projects Costs $191,342,779
Total Cost Savings $44,471,181
Total Energy Savings 655,934 MMBtu or 192,189mWh
Total O&M cost savings $963,087
Total Energy Cost Savings $7,960,766
Average Term 11.4 months
Average Payback 15.5 years (from 3-52)
-Construction Completed Data from 1994 to Sept. 2011

19. Recent EPC Activity in Colorado
Total project Total Energy Total Cost
Cost Savings Savings
23,058 MMBtu or
2008 $17,188,529 $495,339
6,756 mWh
33,988 MMBtu or
2009 $10,853,789 $794,417
9,958 mWh
118,967 MMBtu
2010 $52,801,631 $2,948,685
or 34,857 mWh
9,813 MMBtu or
2011- So far.. $5,466,315 $220,919
2,875 mWh
-Based on date
Average (2008- 58,671 MMBtu or construction
$26,947,983 $1,114,191
2010) 17,191 mWh completed

20. Energy Performance Contracting
• To simplify the process, and ensure the
highest level of quality the GEO has
pre-approved 14 ESCOs to implement
performance contracts in Colorado
• The GEO will work with State, Higher
Ed, Counties, Cities, K-12 Schools, and
Special Districts to navigate the energy
performance contracting process
• You and an energy service company
(ESCO) enter an agreement that allows
efficiency upgrades to be paid for with
savings achieved through decreased
energy consumption and maintenance
costs

21. GEO’s EPC Process
• GEO Pre-qualifies ESCOs
• Simplifies the selection process
• Ensures highest level of quality
• Annual review and re-approval process
• Standardized process/procedures
• Standardized contract documents
• ESCOs under contract with GEO to use GEO
contracts and processes
• On-going guidance/support from GEO
• Technical reviews of deliverables

22. GEO EPC Process
PARTNER WITH GEO
GEO will provide support throughout EPC process
STEP1 INTRODUCTORY STAGE
STEP 2 ESCO SELECTION STAGE
STEP 3 TECHNICAL ENERGY AUDIT STAGE
STEP 4 PERFORMANCE CONTRACTING STAGE
STEP 5 MONITORING & VERIFICATION STAGE

23. FAQ: What about the audit cost?
How much does an audit cost?
• ~$0.20 - $0.30 per square foot
• Process plants will be estimated separately
• Audit cost is disclosed as part of ESCo selection
When you sign an audit contract, you agree:
• If you go forward with EPC,
audit cost is rolled into package and is paid for through savings
• If you stop after the audit,
you pay for the audit then.
What does this mean for planning?
• Decide if you need to encumber funds for this possibility.

24. Case Studies in EPC
K-12 EPC Case Study State EPC Case Study
Mesa County Valley 51, Phase I Department of Human Services, DYC Phase III
Total energy retrofit on facilities with stringent operational
Lighting and HVAC upgrades requirements
Statistics Statistics
• Bottom Line: $4.1M Project, $383K annual savings, • Bottom Line: $9.9M project, $893K annual savings, 13
15 year term year term
• 2,702,842 SF, 51 Buildings • 708,668 SF, 12 Buildings
• 17 Energy Conservation Measures • 24 Energy Conservation Measures
• ESCO: Trane • ESCO: Siemens
• Status: M&V on Phase I, Construction complete • Status: 1st year M&V to be complete within a month,
November 2010, $4.5M Phase II also complete, construction complete in March 2010
Phase III just completed, Phase IV(Solar) current • Estimated Cost Savings: $629K Energy/Water, $263 O&M
• Estimated Cost Savings: $358K Energy, $25K O&M • Actual Cost Savings: About $25K better (preliminary)
• Not on balance sheet: $4.5M in avoided controlled
• Actual Cost Savings: exceeding estimated maintenance costs
• Annual Electric Savings: 3,528,488kWh – Costs the state would not have recovered due to
• Annual Electric Demand Savings: 15,576kWh replacing aging equipment
• Annual Gas Savings: 163 Therms • Annual Water Savings: 64,063,000 Gallons
• Total Annual CO2 Savings: 6,644,425 lbs/ 3322 tons • Annual Electric Savings: 4,231,087kWh
• Annual Gas Savings: 19,395 MMBtu
• $100K Capital Contribution, $3.5M Financed
• Total Annual CO2 Savings: 8,332,704 lbs/ 4166 tons
• $510K in Utility Rebates (part of $804K in total
• $300K Capital Contribution, $9.5M financed
rebates, the largest check to date written by Xcel)
• $90K Utility Rebates

25. Colorado School Districts using EPC
• Adams 14 •Eaton • Lone Star •Platte Canyon • South Routt
• Arriba-Flagler • Elizabeth • Las Animas •Platte Valley • Springfield
• Boulder Valley • Gilpin County • Mancos • Pritchett • Stratton
• Calhan •Haxtun • Manitou Springs • Pueblo 60 • Thompson
• Campo • Hayden •Manzanola • Pueblo 70 • Walsh
• Cheraw • Holly • Mapleton •Roaring Fork • Weld Re-1
• Clear Creek • Julesburg • Mesa County • S. Conejos • West End
• Colorado Springs •Karval • Moffat County • S. Routt • Widefield
• DeBeque •Kiowa • Monte Vista • Stratton • Wiggins
• Dolores RE-4A •Kit Carson • Montezuma-Cortez • Summit • Windsor
• Eads •Lake County • CSDB • Salida R-32 • Woodlin
• Lewis Palmer • Plainview • Sierra Grande • Yuma

26. Colorado Cities and Towns using EPC
• Arvada • Durango • Grand Junction • Pueblo
• Aspen • Englewood • La Jara • Rifle
• Boulder • Florence • Lafayette • Salida
• Breckenridge • Fort Collins • Littleton • Silverthorne
•Colorado Springs • Fowler • Longmont • Steamboat Springs
• Commerce City • Frisco • Manitou Springs • Westminster
• Cortez •Glenwood Springs • Meeker • Windsor
• Crested Butte • Golden • Montrose

27. Colorado Counties using EPC
• Arapahoe County • Freemont County • Montezuma County
• Bent County • Garfield County • Montrose County
• Chaffee County • Gilpin County • Otero County
• Cheyenne County • Gunnison County • Ouray County
• Clear Creek County • Jefferson County • Prowers County
• Custer County • Kit Carson County • Pueblo County
• Delta County • La Plata County • Rio Blanco County
• Eagle County • Lincoln County • Routt County
• El Paso County • Mesa County • Sedgwick County
• Elbert County •Moffat County •Washington County

28. Colorado State Departments using EPC
• Human Services • Revenue
• Corrections • Wildlife
• Transportation • Agriculture
• Natural Resources, State Parks • Public Health and Environment
• Education
• Personnel and Administration, Capital Complex

29. Colorado Higher Education using EPC
• UC Boulder – Housing • Mesa State College • Red Rocks CC
• UC Colorado Springs • Western State College • Northeastern JC
• UC Denver • Arapahoe CC • Northern Colorado
• CSU – Ft. Collins • Colorado Northwest CC • Trinidad State JC
• CSU – Pueblo • Fort Lewis CC • Colorado Community
• School of Mines • Lamar CC College Systems
• Adams State College • Pikes Peak CC

30. Opportunities and Challenges for EPC
Opportunities Challenges
• Cyclical; aging projects • Program Funding
become new projects • Payback Term
• Innovative technologies • Primary market saturation
• Growth industry in 5-10 years
• Underserved markets in • Finance
Colorado- Industrial,
Commercial, • Public: TABOR (or son
Wastewater/Water of TABOR)
Treatment, Housing • Private: IRR, ROI, etc.
Authorities, Private
Sector, Special Districts,
fleets, more. …

31. Private Sector EPC
• DOE funding opportunity awarded in October
– $600,000 over 2 years, est. 10 private sector
public projects
– Buy down cost of TEA and guide clients through
process in exchange for identifying market barriers
– 5 pilots identified for first year, next 5 to be
competitively selected

32. Find out more…
Governor’s Energy Office website
www.colorado.gov/energy
Energy Efficiency - Commercial Buildings
Program - Performance Contracting
•Sample documents & contracts
•Case studies
•List of pre-approved ESCos

33. Support from the GEO
EPC information and support:
• Conor Merrigan, GEO’s Commercial Energy
Efficiency Manager-303.866.3965
conor.merrigan@state.co.us
The GEO’s Community Energy Coordinators (17)
www.colorado.gov/energy > Local Community > CECs

34. colorado.gov/energy
Questions?